Image: Home depot
Marcio Jose Sanchez  /  AP file
Home Depot, the nation's largest home improvement store chain, plans to spend $350 million to improve customer service and store appearance. It also plans to roll out self-checkout stations and customer service hotline and enhanced worker bonuses later in the year.
updated 10/11/2006 4:35:05 PM ET 2006-10-11T20:35:05

Home Depot Inc. has pledged to spend $350 million in the second half of this year to lure more customers in the midst of a cooling U.S. housing market that is crimping business at home improvement retailers.

But some analysts are waiting to see if the industry leader makes good on the renewed push to lift customer service and improve store appearance.

At its highest-traffic stores, Atlanta-based Home Depot is adding workers, expanding merchandise and installing call boxes that shoppers can use to summon staff help.

"In a down economy, what's going to drive sales is your ability to interact with customers," said Jose Lopez, who serves as chief customer officer.

The latest refurbishing effort is reminiscent of 2003, when Home Depot vowed to spend $880 million to remodel aging stores, upgrade technology and improve worker training.

Some analysts said the earlier overhaul was not fully ramped up by Home Depot, and hurt sales as chief rival Lowe's opened newer stores in big U.S. cities.

At Home Depot, "we've never seen evidence of a full-fledged rollout of initiatives or, more importantly, of incremental investment in the stores," whether in physical improvement or staff additions, said David Schick, an analyst with Stifel Nicolaus.

"The question out there now is will Home Depot truly commit and put more orange aprons on the floor, and will Lowe's continue its robust levels of associate help" as the slowing housing market pressures business, Schick added.

Home Depot's sales have weakened this year as U.S. home sales, one of the prime drivers of home improvement, cooled. In the second quarter, sales at stores open at least a year were down 0.2 percent, and Home Depot said retail store sales disappointed in the first quarter.

Though the chain is selling more to home builders and other contractors through its Home Depot Supply division, its more than 2,000 stores account for 87 percent of company revenue.

A recent walk through a Home Depot store in a busy section of midtown Atlanta found an expanded assortment of products such as bath vanities, door locks and appliances, and the addition of information graphics in the tool departments.

"In 1979, our motto was 'stack it high and let it fly,"' Lopez said. "Today, the customer wants you to have more and more knowledge."

Schick said some stores, based on his recent visits, are making better use of signs and have added more holiday products as part of the latest initiative.

"We're seeing some evidence that (improvements are) starting to happen but it's not enough evidence for us," Schick said. "We need to wait to see proof in the labor levels and in their comp," or same-store sales.

Other changes Home Depot is making include the rollout of self-checkout stations to all stores, launch of a customer service hotline and enhanced worker bonuses.

"Investing in the stores may not pay dividends in the midst of a housing correction, but may pay off over the medium and longer term when the economy is a little bit more favorable," said Dan Popowics, an analyst with Fifth Third Asset Management.

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